Simplifying BitMEX with Peer-To-Peer Swaps

Futures contracts are confusing to many crypto traders. The various expiry dates and ticker symbols only add to the complexity. How can we create an instrument that feels like spot or margin trading, but has the high leverage that traders desire? We’ve been spending the last months working on a solution: a P2P swap without expiry.

Product Description

This product is a synthetic instrument designed to follow traditional margin trading as closely as possible.

Each day at 12:00 GMT, long holders pay a daily funding rate, and short holders receive a daily funding rate. The rate is determined by the funding index. The funding is paid in Bitcoin.

Funding Bitcoin Payment = Bitcoin Notional * Daily Funding Rate

The product is marked to the underlying spot price for the purpose of unrealised PNL (profit and loss) and liquidations. Each Friday at 12:00 GMT, rebalancing occurs. At a rebalance, unrealised PNL becomes realised PNL; any profit adjustment will be applied as well.

Advantages

Expiries are gone. The synthetic interest-bearing structure emulates futures contracts of any expiry. The basis you pay or receive is equal to the length that you hold the contract.

As a significant bonus, liquidity will no longer be spread across various maturities. This should significantly improve our XBT series, which currently has 5 expiries. Note that if and when we roll this structure out to the XBT series, existing long-dated contracts will remain active until expiry. At expiry, to concentrate liquidity, they will not relist.

Compared to margin trading on other platforms, BitMEX P2P swaps will provide increased leverage, deeper funding limits, and greater simplicity. Because all lending is synthetic, no crypto or fiat needs to change hands, nor do users need to use any currency other than Bitcoin.

P2P Ether Swap, ETHXBT

Ether will see first iteration of this new product type. Buyers of ETHXBT will post Bitcoin as margin, and pay a daily funding rate based on the previous 24 hour average Poloniex Bitcoin offer rate. Sellers will receive the Bitcoin funding that buyers pay each day.

The contract will be marked to the Ether / Bitcoin Poloniex spot rate. Each Friday at 12:00 GMT, the unrealised PNL will be realised at the Ether / Bitcoin Poloniex spot rate.

ETHXBT is currently live on BitMEX Testnet. We welcome all user feedback on how to improve this new product.

In Other News: Airbnb’s Achilles Heel, and its Bitcoin Solution

Airbnb has unlocked a vast amount of value in underused residential properties. Much to the dismay of the hotel and guesthouse industry, travelers are flocking to Airbnb for their accommodation needs.

The incumbents fight Airbnb through antiquated guest house ordinances. They attempt to scare hosts by lobbying the government to selectively enforce unneeded and unwanted laws. Unfortunately the value gained by hosting is too large for hosts to stop.

Companies like Airbnb and Uber are disruptive, but they have one giant achilles heel: payments.

Unfortunately, Airbnb and Uber must rely on banks and other financial institutions to process the payments to hosts and drivers. All it takes is a call from a government regulator or banks, and the party stops. Overnight their businesses could be worth zero.

Operation Choke Point is a very successful strategy that the US Department of Justice uses against industries that are not illegal, but the government disapproves of. It has successfully used these strategies on the Gaming, Adult Entertainment, and Cannabis sectors.

It is almost impossible for businesses operating in these industries to obtain banking partners. As a result, they are cash heavy and their growth is curtailed.

Airbnb took the right step towards addressing this problem through their aqui-hire of ChangeCoin [Business Insider]. It is likely that they will use the acquired talent to implement a more secure form of payment using Bitcoin or another digital currency. If customers pay using a decentralized currency like BItcoin, Airbnb and similar companies can grow much larger.

The killer app for Bitcoin is something we already use daily. If companies like Airbnb can use their UX/UI skills to make paying with Bitcoin seamless and painless, adoption of Bitcoin and other crypto currencies will explode. Any marketplace app that is disrupting an entrenched incumbent should take notice, and begin thinking about how they will solve a payments halt.

Deny Until You Don’t

Ether: What a ride!

Price action was on a one way trip down from 0.025 ETH/BTC to a low of 0.0165, only to drift upwards to the 0.021. The drift upwards could be attributed to the rumour that OKCoin will add ETH for trading. They have since released a statement on Twitter denying this.

If you are feeling déjà vu, it’s because BitFinex released a similar denial announcement back in February only to list ETH for trading about two weeks later. What happened to the price in that time? Leading up to the denial from BitFinex, the price rose 50%; from their denial to actual listing (Feb 25 – Mar 12), the price went from 0.015 to a peak of 0.035 (133% return).

If there is one rule that I have learnt in the Crypto market it’s to FOMO ‘buy the rumour, sell the fact’. This could present a good opportunity to buy ETH before OKCoin decides to list it (if in fact they do). It makes sense for them, since it is listed on almost every other exchange now; furthermore it trades 20x more volume than LTC [CoinMarketCap].

Turning to technical analysis, we are entering an interesting zone here where the long-term and short-term trend ranges cross. 0.02 ETH/BTC is where these ranges intersect; it will be interesting over the next week to see where we break out. I am feeling bullish given the OKCoin rumour. Whether going long or short, judicious use of Stop Limit Orders is advised.